Nvidia and Amazon Web Services, Amazon’s profitable cloud arm, has a surprising audience. For starters, their core business grew out of a happy accident. For AWS, it was realizing that it could sell the internal services—storage, computing, and memory—that it had built for itself in-house. For Nvidia, it was the fact that the GPU, created for gaming purposes, was also suitable for processing AI workloads.
This ultimately led to some explosive revenue growth in recent quarters. Nvidia’s revenue is growing by triple digits, moving from $7.1 billion in the first quarter of 2024 to $22.1 billion in the fourth quarter of 2024. That’s a pretty amazing trajectory, though the vast majority of that growth was in the operations of the company’s data centers.
While Amazon has never seen that kind of strong growth, it has consistently been a big driver of revenue for the e-commerce giant, and both companies have experienced first-mover advantage. Over the years, however, Microsoft and Google have entered the market to create the Big Three cloud vendors, and it’s expected that other chipmakers will eventually start gaining significant market share as well, even as the revenue pie continues to grow over the next several years.
Both companies were clearly in the right place at the right time. As web and mobile applications began to emerge around 2010, the cloud provided the resources on demand. Businesses soon began to see the value of moving workloads or building applications to the cloud, rather than operating their own data centers. Similarly, as artificial intelligence took off over the last decade and large language models more recently, it coincided with the explosion in the use of GPUs to process these workloads.
Over the years, AWS has grown into a highly profitable business, currently running at close to $100 billion, one that even without Amazon would be a hugely successful company. But AWS growth has begun to slow, even as Nvidia takes off. It’s partly the law of large numbers, which will eventually affect Nvidia as well.
The question is whether Nvidia can sustain this growth to become a long-term revenue force like AWS for Amazon. If the GPU market starts to tighten, Nvidia has other businesses, but as this chart shows, they’re much smaller revenue generators that grow much more slowly than the GPU data center business currently.
Image Credits: Nvidia
The short-term economic outlook
As the chart above notes, Nvidia’s revenue growth has been astronomical in recent quarters. And according to both Nvidia and Wall Street analysts, it’s set to continue.
In the recent one earnings report covering the fourth quarter of its fiscal 2024 (the quarter ending January 31, 2024), Nvidia told investors that it expects revenue worth $24 billion in the current quarter (Q1 2025). Compared to the first quarter last year, Nvidia expects growth of around 234%.
That’s just not a number we often see from mature public companies. However, given the company’s huge revenue growth in recent quarters, its growth rate is expected to slow. From a 22% revenue increase from the third to fourth quarter of its recently completed fiscal year, Nvidia expects a more modest growth rate of 8.6% from the last quarter of its fiscal year 2024 to the first quarter of its fiscal year 2025. Sure, in a year A comparison over time rather than a look back at just three months, Nvidia’s growth rate remains incredible for the current period. But there are other growth spurts on the horizon.
For example, analysts expect Nvidia to generate revenue worth $110.5 billion in the current fiscal year, up 81% from last year’s results. This is dramatically lower than the 126% gain it posted in the recently concluded fiscal 2024.
To which we ask: So? For the next several quarters at least, Nvidia is expected to continue to grow its revenue past the $100 billion annual rate, impressive for a company that in the year-ago period today had total revenue of just $7.19 billion.
In short, analysts, and to a lesser extent Nvidia, see huge buckets of growth ahead for the company, even if some of its impressive revenue growth numbers slow this calendar year. It is not clear what will happen in a little longer time.
Forward momentum
It looks like AI could be the gift that keeps on giving for Nvidia for the next several years, even as more competition from AMD, Intel and other chip makers starts to emerge. Like AWS, Nvidia will eventually face tougher competition, but it controls so much of the market right now that it can afford to divest some.
Looking at it purely at the chip level, not boards or other adjacent areas, IDC shows that Nvidia is firmly in control:
Image Credits: IDC
If you look at a table level with these market share numbers from Jon Peddie Research (JPR), a company that tracks the GPU market, while Nvidia still dominates, AMD is coming in stronger:
Image Credits: Research by Jon Peddie
C Robert Dow, an analyst at JPR, says some of this variation has to do with when new products are introduced. “AMD gains percentage points here and there depending on market cycles — when new cards are introduced — and inventory levels, but Nvidia has been dominant for years and that will continue,” Dow told TechCrunch.
Shane Rau, an IDC analyst who tracks the silicon market, also expects the dominance to continue, even as trends shift and change. “There are trends and countertrends, the markets that Nvidia is in are big and getting bigger, and growth will continue, at least for another five years,” Rau said.
Part of the reason for this is that Nvidia sells more than the chip itself. “They’ll sell you boards, systems, software, services and time on one of their supercomputers. So any of those markets are big and growing, and Nvidia is attached to all of them,” he said.
But not everyone sees Nvidia as an unstoppable force. David Linthicum, a longtime cloud consultant and author, says you don’t always need a GPU, and companies are starting to realize that. “They say they need GPUs. I look at it, do some back of the envelope math, and they don’t need it. The CPUs are perfect,” he said.
As that happens, he believes Nvidia will begin to slow down and the competition will loosen its hold on the market. “I think we’ll see Nvidia transform into a weaker player over the next couple of years. And we’re going to see that because there are so many substitutes being created out there.”
Rau says other vendors will also benefit as companies expand AI use cases with Nvidia products. “What I think you’ll see going forward are growth markets that will create tailwinds for Nvidia. But then there will be other companies that will follow in these sky winds that will benefit greatly from artificial intelligence.”
Some disruptive force is also likely to come into play and this would be a positive effect in preventing a company from becoming too dominant. “You almost hope for disruption to happen because that’s the way markets and capitalism work best, right? Someone gets an early lead, other suppliers follow, the market grows. You get established players, who end up being upset by a better way of doing the same thing in their market or neighboring markets moving into theirs,” Rau said.
In fact, we’re starting to see it happen at Amazon as Microsoft gains ground through its relationship with OpenAI and Amazon is forced to play catch-up when it comes to AI. Whatever happens to Nvidia in the long run, it’s firmly in the driver’s seat right now, making money hand over fist, dominating a growing market, and having just about everything going right. But that doesn’t mean it will always be this way or that there won’t be more competitive pressure down the road.
